Economist says it could mean region will end year with key figure declining

METRO rail Green Line construction work on Harrisburg Boulevard in between Hughes Street and 65th Street. The Green Line runs from downtown Houston through the East End along Harrisburg. Friday, March 25, 2016, in Houston. ( Marie D. De Jesus / Houston Chronicle ) less

METRO rail Green Line construction work on Harrisburg Boulevard in between Hughes Street and 65th Street. The Green Line runs from downtown Houston through the East End along Harrisburg. Friday, March 25, 2016, ... more

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The Marriott Marquis Hotel, a 1,000-room hotel under construction near the George R. Brown Convention Center and Discovery Green, is slated for completion in the summer of 2016.

The Marriott Marquis Hotel, a 1,000-room hotel under construction near the George R. Brown Convention Center and Discovery Green, is slated for completion in the summer of 2016.

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MD Anderson Cancer Center in Houston, at night, Tuesday August 14, 2012.

The University of Texas M.D. Anderson Cancer Center in the Texas Medical Center.
MD Anderson Cancer Center in Houston, at night, Tuesday August 14, 2012.

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The Igloo facility in Katy, Texas utilizes the services of Avangard Innovative to help cut down on waste and capture more revenue from recycling. Igloo, 777 Igloo Road, Katy, Texas.
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THE Houston area endured another net loss of jobs in March, prompting University of Houston economist Bill Gilmer to predict for the first time that the region could reach the end of 2016 with fewer jobs than it started with.

The rate of those losses accelerated over the first quarter, with a seasonally adjusted drop of 4,400 jobs in January and February combined, followed by 2,600 net jobs cut in March, Gilmer said.

The area's unemployment rate also climbed by 0.2 percent in March, the Texas Workforce Commission reported Friday, to 4.9 percent. While that remains lower than the national rate, the trends have opposite trajectories.

"This has just been a brutal quarter for energy sector," Gilmer said. "As tough as it's been in energy up until this last quarter, this last quarter set a new mark."

The Baker Hughes rig count, which has tracked the number of oil and gas rigs since 1944, hit a record low on Friday of 440, down 77 percent since it peaked in 2014.

After previously predicting Houston would add 10,000 to 15,000 jobs in 2016, Gilmer now thinks the area will have that many fewer by the end of the year. The situation is worse than he expected, but he thinks the bottom may be near.

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Sector by sector

Some industries are posting job gains in the area, while others are seeing losses.

"When we go into recovery, we're starting from a later and deeper point than I anticipated," he said.

Once the industry hits bottom, it'll take about six months for the rig count to start rising again and another six months after that before employment picks up, he said.

As a result of the energy downturn, one in three oil field services jobs has been cut, and one in five jobs lost in the energy sector more broadly, said Patrick Jankowski, senior vice president of research for the Greater Houston Partnership.

Jankowski said it is too soon for him to determine whether Houston will end up with positive or negative job numbers for the year, but he estimated that oil and gas industry layoffs will peak at midyear.

"Then we'll see how the secondary sectors do after that," he said.

While parts of the economy more closely tied to consumers, like retail and restaurants, are still faring well, he's noticed a slowdown in areas that have remained strong up until this point.

"I'm amazed that with the depth of job losses in the oil and gas industry that Houston's economy continues to perform as well as it does," Jankowski said. "And that's a function of, we are more diversified or we just have incredible resilience, or maybe the effects are still lagging."

Many in the Houston area still have yet to feel the oil and gas industry's pain. The career counselor at the University of Houston's Conrad N. Hilton College of Hotel and Restaurant Management, Colleen Gleeson, said students graduating from the school still have plenty of options; 93 percent of last fall's graduates found jobs within three months.

"Our placement rate has continued to climb, so our students certainly have not felt the brunt of that," she said.

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Over the past year, mining and logging employment has dropped more than 13 percent, as did durable goods manufacturing, which represents oil field equipment that was in high demand two years ago. Architectural and engineering services - including many of the Energy Corridor's white-collar jobs - shed nearly 8 percent of its jobs from a year ago and 1,100 positions last month alone.

Jankowski said he thinks energy-related companies are about done cutting blue-collar workers, but he expects layoffs to continue in office jobs.

Meanwhile, some 4,000 jobs were created last month in leisure and hospitality, a sector where employment has risen 6.6 percent over the last year. Educational and health services grew jobs by 4.4 percent from a year earlier.

Hospitals have been a major source of hiring as they add and expand locations, but economists say the health care field may still be enjoying momentum from the oil and gas boom and subsequent population growth.

Still, layoffs and bankruptcies continue in the energy sector.

"When the rig count continues to fall as it did today," Jankowski said, "you start to wonder what's next."